New Carbon Tax Proposal Under Fire By Washington Manufacturers

House Democrats have introduced HB 1646, which would impose a new carbon tax of $15 per metric ton on greenhouse gas emissions generated by fossil fuels and electricity. Despite offering tax exemptions for certain manufacturers, state industry leaders are opposed to the proposal. Photo: Kaiser Aluminum.

House Democrats have proposed a new carbon tax they say addresses criticisms leveled against similar proposals that have failed to garner legislative or voter support. However, state industry members testifying at the March 14 public hearing of the House Environment Committee warned that tax would leave employers vulnerable to out of state competition and increase utility costs.

Charlie Brown is a lobbyist for Cascade Natural Gas, a regional natural gas distribution company. He told committee members to “think seriously about how an increase in natural gas costs are going to impact residents, because certainly the cost of heating your home is going to go up significantly” if the bill is passed.

“This legislation with the tax proposed would increase those costs, and most important it would have a significant impact on jobs,” he added.

Amended Carbon Tax Measure

Chair Rep. Joe Fitzgibbon (D-34) is the primary sponsor of HB 1646. He told colleagues at the March 14 public hearing that the bill “takes into account many of the concerns that we’ve heard about past proposals” such as Initiative 732, a carbon tax voters rejected by 60 percent in November.

“This bill is our best shot at starting to reduce our emissions to a safe level in this legislative session,” he said. “I welcome comments about how to improve this proposal, but I hope those who are opposed will think carefully about what the impacts will be and what the outcomes will be if the legislature continues inaction.”

The March 14 public hearing of the House Committee on Environment dovetailed off a work session the day prior concerning Governor Jay Inslee’s Clean Air Rule, enacted in September through his state Department of Ecology. The rule requires employers that annually emit more than 100,000 metrics tons of carbon dioxide (CO2) cut emissions by five percent every three years, or an average of 1.7 percent annually.

At the March 13 work session, Matthew Cohen called it “a badly flawed rule” that lacked clear statutory authority. He is an attorney representing the Association of Washington Business (AWB). The association is leading the legal challenge filed by state employers against the rule.

HB 1646 would place a tax on greenhouse gas emissions generated by fossil fuels and electricity, starting July 2018. The tax rate would be $15 per metric ton of carbon dioxide, and would increase by seven percent every year until 2047. However, the tax’s rate of increase would drop if emitters collectively achieved or were near the emission reduction goals set by the state in 2008.

Those goals for overall state emissions are:

Reduced to 1990 levels, by 2020

Reduced to 25 percent below 1990 levels, by 2035

Reduced to 50 percent below 1990 levels, or 70 percent below the state’s expected emissions for that year, by 2050.

Data from Ecology indicates that overall state carbon emissions are currently dropping. Their most recent greenhouse gas emissions inventory showed that between 2007 and 2011, annual emissions dropped from 101.6 to 91.7 million metric tons of CO2.

Bill Faces High Hurdle In State Senate

State Sen. Doug Ericksen (R-42) is Chair of the Senate Energy, Environment and Telecommunications Committee. He told Lens that if the bill passed in the House, he would give it a public hearing, but added that the proposed tax “by its own admission is a job-killer.”

“Half of a bad idea is still a bad idea,” he said.

According to the bill’s preliminary fiscal note, the tax is expected to generate nearly $1 billion in revenue during the 2017-19 biennium, $2.37 billion in 2017-19, and $2.7 billion in 2021-23. Most of that revenue would go toward funding clean energy projects. Other portions of that revenue would fund a variety of state programs, including a low-income carbon tax grant program for state residents and forest health restoration projects. Another program funded by the tax would aid unemployed workers whose industry are affected by the tax.

Tax Exemptions To Prevent Economic Leakage

One section of the bill would have the state Department of Commerce identify EITEs that could apply for exemption from the carbon tax. At minimum, metal, glass, cement, and pulp manufacturers would be legible. The exemption would be reduced or removed if the facility or the jobs were relocated out of state. Maritime aviation emissions would be exempt until 2022.

However, opponents such as Chris McCabe argued that despite the tax exemption provided for EITEs, the bill would still put them at a “competitive economic disadvantage compared to other mills around the world.” He is the Executive Director for the Northwest Pulp and Paper Association.

“Unfortunately, as the bill is currently drafted, these sections do not provide adequate protections or certainties,” he added.

In agreement was Kyle England, Senior Manager for External Affairs at Kaiser Aluminum. He told the committee that the tax could send production out to less efficient manufacturers in other states.

“The demand for aluminum will continue to grow, and it is only a question of where it will be produced,” he said.

Also warning of competitive disadvantage was Patrick Jablonski, ‎Environmental Manager for Nucor Steel, the state’s only steel mill. He asked the committee to “consider the implications of the compounding effect of this bill and the Clean Air Rule” and how it affects their competition with steel mills in China.